Westpac Banking Corp (ASX: WBC) shares have pulled back from their recent highs, which may tempt investors who missed the earlier run.
The fully franked dividend also remains appealing.
But has the lower share price created one of the best buying opportunities on the ASX this week?
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A fair price rather than a bargain
Westpac shares are trading around $36.66.
According to consensus estimates, this puts the shares on a price-to-earnings ratio of around 17.2 times FY26 earnings and 17.1 times FY27 earnings.
Those multiples are far from outrageous, particularly for a major bank with a large customer base and a strong capital position.
The forecast dividend adds more weight to the investment case.
Consensus estimates are for dividends per share of $1.54 in FY26 and $1.55 in FY27, giving Westpac forward dividend yields of approximately 4.2% in both years. Those dividends are expected to be fully franked, which could improve the after-tax income for eligible investors.
I can understand why that combination would attract income-focused shareholders.
Westpac is making progress
I think the investment case has improved under CEO Anthony Miller.
Westpac has been growing across mortgages, business lending, and deposits, while also trying to reduce unnecessary complexity across the company. Its first-half result showed continued lending momentum, lower costs compared with the previous half, and a capital position comfortably above management's target.
I also like the opportunity in business banking. Relationships with business customers can extend across lending, deposits, payments, equipment finance, working capital, and transaction services. That can make them deeper than a standard home loan relationship and provide several ways for Westpac to earn revenue.
The UNITE technology program could also leave Westpac with a simpler and more efficient bank. Bringing systems and processes together should eventually improve the customer experience and reduce duplication, although a transformation of this size will require careful execution.
Why I am staying selective
The biggest issue for me is the limited earnings growth currently expected.
Consensus estimates suggest EPS will rise only slightly between FY26 and FY27. At around 17 times forecast earnings, I do not think investors are being offered enough of a discount to compensate for that modest outlook.
Banking also remains intensely competitive. Westpac must fight for mortgages and deposits while investing heavily in technology, meeting regulatory requirements, and preparing for credit losses if economic conditions weaken.
Foolish takeaway
Westpac is heading in a better direction, and the recent share price weakness has improved the entry point.
Existing shareholders have good reasons to remain patient while collecting a fully franked dividend. Income investors may also find the forecast yield attractive enough to begin a measured position.
Even so, I would not call Westpac shares a top buy this week. The valuation looks fair rather than cheap, while forecast earnings growth remains subdued.
For me, Westpac is a hold at current prices and a potential buy after a further pullback.
